What is in a pre-construction agreement of purchase and sale?

Resale agreements in Ontario run to a handful of pages on a standard form. A builder’s pre-construction agreement is a different species: long, bespoke, and written to protect the builder. Here is what is in it.

The commercial terms

• Purchase price, and whether it is stated inclusive of HST.
• Deposit schedule, usually several instalments over 12 to 24 months, with specific dates. Typical structures.
• The lot and model, including elevation, and any lot premium.
• Closing date, usually described as a first tentative date with the builder’s right to extend.

The clauses that cost money

HST rebate assignment and indemnity. You assign the rebate and indemnify the builder if you turn out not to qualify. On low-rise, this is up to $80,000 of exposure. Read this one carefully.

Adjustments and levies. A list of amounts added to the price on closing: development charge increases, utility connections, meter installations, Tarion enrolment, grading and sodding deposits, occupancy fees where applicable, and the builder’s legal and administrative fees. Unbudgeted, this list is where “the price I agreed to” becomes a surprise. More.

Development charge escalation. Whether increases in municipal charges between signing and closing are passed to you, and whether that is capped. An uncapped clause on a four-year closing is an open-ended liability. More.

The clauses that shift control

Extension rights. How many times, and by how long, the builder may move your closing date, and what notice is required. Low-rise closings move routinely.

Substitution rights. The builder’s ability to substitute materials, finishes, fixtures and sometimes elevations for items of “equal or better quality”, a judgment they make.

Grading, driveway and sodding timing. Often expressly deferred past closing, subject to season and municipal approval. What to expect.

Assignment restrictions. Most low-rise agreements restrict or prohibit assignment, or permit it only with consent and a fee. More.

The schedules

Attached to the back, and genuinely important: the specifications (what is actually included), the site plan, the model and elevation drawings, and often a Tarion addendum setting out the statutory closing-date machinery and your delay compensation rights.

The specifications are where what you are actually getting is defined. A sales centre model home is a marketing object; the schedule is the contract.

Reading it properly

You will not absorb this at a sales centre, and you are not meant to. Get it reviewed before signing, because on freehold there is no way back out.

Bring me the agreement before you sign it.